Reserve Bank of India calls for constant monitoring of cryptocurrencies

The Reserve Bank of India (RBI) has called for “constant monitoring” of cryptocurrencies due to financial stability concerns and their rapidly growing use.

The central bank has published its “Report on Trend and Progress of Banking in India” for the year ended June 30, 2018. Among other things, the report noted the proliferation of financial technology (fintech) and associated risks and opportunities.

The report said:

“Crypto-currencies need constant monitoring on overall financial stability considerations, given the rapid expansion in their usage.”

In April 2018, the RBI imposed a crypto banking ban, whereby it mandated that entities regulated by it shall not deal in cryptocurrencies or provide services for facilitating dealing with or settling cryptocurrencies. The domestic cryptocurrency exchanges took the matter to the Supreme Court of India, and a final verdict is awaited.

The report also made a note of the review, undertaken by the Financial Stability Board (FSB), of the financial stability risks posed by the rapid growth of crypto-assets.

“Its [FSB’s] initial assessment is that crypto-assets do not pose risks to global financial stability currently. The market continues to evolve rapidly, however, and this initial assessment could change if crypto-assets were to become more widely used or interconnected with the core of the regulated financial system,” it said.

Recent reports suggested that regulatory authorities in India were considering introducing regulation for cryptocurrencies instead of imposing a complete ban. In addition, Pon Radhakrishnan, the minister of state for finance, told the Lok Sabha, the lower house, last month that it was difficult to state a specific timeline to come up with clear recommendations on cryptocurrencies.